Insurance & Mortgages
If you can afford the land and the cost of the build, great - If you cannot you will require some help with financing your project.
1 Before you start, you will have to purchase self-build site insurance, which is essential for anyone planning an extension, renovation, conversion or new build. Structural Warranties will protect your project against a defect in the design, workmanship, or materials of your self-build.
2 Your responsibilities do not end with your property. Your builder will also need appropriate cover. You will need the work guaranteed and insurance backed just in case the company go out of business. The builder will also need Public Liability Insurance to cover the people working at your property.
3 The government are yet to set up a self-build mortgage scheme with one of the banks they / we own. However, some banks do provide self–build mortgages and it is worth making independent enquires. www.money.co.uk provide a list of some of the providers.
4 The major difference between self-build and regular mortgages is that funds are released in stages rather than as a single lump sum. This reduces the lenders risk and ensures the money is spent in relation to the plans as and when required. They are often called Accelerator Mortgages. www.moneysupermarket.co.uk among others; is also a good source for finding further information.
5 There are a variety of lending products available to self builders, including variations relating to Delayed Completion Bridging Finance, Asset Based Finance and Unencumbered property Finance. Many self-builders use www.buildstore.co.uk for all of the information they need. They are a specialist company that deals directly with many of the self-build mortgage providers.
6 Buildstore also helps negotiate Developer’s finance. This is a product directed at those that are not building for themselves, but are instead approaching their build project for pecuniary gain. It can be expensive, but the funds provided are not calculated in the same fashion as traditional mortgages. What you can borrow will be based on the end value of the property to be built. So, if you own the land and the build costs are presumed to be £250,000 and the end value is expected to be £600,000. The lender will invariably provide you with a 100% of the costs for the build. So, it will cost you nothing, except the interest calculated at the end. That interest is expensive, but as you can build a more expensive home than you can afford, it is a good way of working. We have a costings examples on the right.
An Accelerator Mortgage (or stage release mortgage) is the familiar type of financing for individual self build projects. We looked around for the best deals, and these are our findings as of December 2012
There is also a useful tool on the Buildstore website, which will help you calculate the approximate cost of building your new home: